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Railroads to face extra scrutiny on ag shipment delays

Christopher Doering, USATODAY
12:22 a.m. CDT June 24, 2014

A BNSF engine leads the way across Eighth Street near the switchyard iin downtown Sioux Falls in this August 2012 photo. The BNSF and Canadian Pacific Railway are being required to provide a progress report this week to the Surface Transportation Board on plans to reduce their backlog in agricultural shipping.
(Photo:
AP
)

WASHINGTON – Canadian Pacific Railway and BNSF Railway will face extra federal scrutiny as they work to address rail car shortages and delays that agricultural groups worry could affect farmers’ ability to get crops to market this fall.

The Surface Transportation Board has ordered Canadian Pacific Railway and BNSF Railway to provide the agency an update on their plans to reduce the backlog of grain cars across their networks by Friday.

The railroads must then provide weekly status reports showing the number of total outstanding grain car orders, the number of orders filled and the average number of days late for rail cars that are behind schedule in being delivered until the service situation is resolved.

“Although the data submitted by both railroads indicates some initial progress toward reducing their grain car order backlogs and grain car delays, the Board remains very concerned about the limited time period until the next harvest, the large quantities of grain yet to be moved, and the railroads’ paths toward meeting their respective commitments,” the STB said in its decision.

In recent months, BNSF and Canadian Pacific have come under fire from shippers, South Dakota’s Washington delegation and the STB itself for shortages and delays in delivering rail cars to farmers, ethanol plants and grain elevator operators. The decision by the STB, announced Friday, was the result of an April hearing held by the agency to examine the recent rail delays and find ways to improve service. Sen. John Thune and other representatives from South Dakota appeared before the panel.

Sen. Tim Johnson, D-S.D., said the “extra scrutiny” the STB has placed on the railroads with the new reporting requirements will help grain shippers hold them accountable.

“This ... is an important step in the right direction for South Dakota’s farmers and grain elevator operators,” Johnson said.

A spokesman with Canadian Pacific said the railroad was reviewing the STB order. Amy Casas, director of corporate communications with BNSF, said the shipper will supply the requested information to the STB, much of which already is given to customers and the regulatory agency.

“We are disappointed that we have not met our customers’ expectations, but we have made significant progress toward substantially satisfying outstanding orders and we will be prepared for this fall’s harvest,” she said.

The rail system in much of the western Corn Belt has been slowed by a plentiful harvest last year, higher coal and oil volumes, and the extraordinarily long, cold winter that reduced the size and speed of trains that operated.

While railroads have managed to reduce the delays in delivering rail cars, the lingering bottleneck has led to concerns that with corn and soybean stockpiles from last year’s harvest still sitting at farms and grain elevators, the rail network could be further stressed starting in July when South Dakota farmers harvest their wheat. Corn and soybeans also will be harvested later this fall, providing more demand for rail cars.

“We do have significant concerns, and those concerns are real,” said Lisa Richardson, executive director with the South Dakota Corn Growers Association. “We are excited about this, and we think it will put transparency out there.

“A significant backlog persists, but going forward, candidly, there is a lot more product moving on the rails, and this isn’t going to correct overnight.”

Richardson estimated about 30 percent of last year’s corn harvest in the state is still being held at farms and grain elevators. South Dakota tends to be one of the last states to deliver its grain to the market because of its location on the fringe of the U.S. Corn Belt.

The cost of moving corn to the marketplace is more than 90 cents a bushel in parts of South Dakota. The higher transportation costs compared to other areas has caused farmers to wait longer to move their corn in hopes they will decline as the rail network improves.

At Absolute Energy, a 125 million gallon a year ethanol plant in St. Ansgar, Iowa, the company said service is improving, but its tanks holding the corn-based fuel are full when the trains pull up to take the product away. Rick Schwarck, Absolute’s president, said normally at this time of the year there would be a little more room in the tanks to hold ethanol. Earlier this year, Absolute cut production by up to 20 percent because of the delays in getting its cars picked up by the railroads.

“Service now is not matching service a year ago,” Schwarck said. “When you are dealing with any sort of delays in the summertime, when you normally probably wouldn’t have much, it puts you on pins and needles for what the coming winter will do if we have a repeat of last year.”

The order put in place by the STB follows a similar move by the regulator earlier in April when it ordered BNSF and Canadian Pacific to provide weekly updates on delivery of fertilizer during the spring planting season.